1. How and why did you get started investing? What is your background?
I sold a business in 1994 which I started in university. I wanted my money to work for me. I really knew nothing. However through the advice of my accountant and attorney I started investing. I read the "Market Wizards" books and was intrigued. I invested in real estate and the stock market. I had a fraternity brother who owned a commodity brokerage. From "Market Wizards" I learned about trend following and started investing and learning.
2. Describe your investing strategy and portfolio organization. Which valuation methods do you use? Where do you get your investing ideas from?
I am a trend follower. I let the market tell me what to do. I look at approximately 100 markets. I want to try to buy the strongest markets based on trend and relative strength if I can put on a low risk trade – i.e., much less than 1% of my account. Conversely I look to sell the weakest; however, I make it much harder to go short as historically most of the money came from longs.
3. What drew you to that specific strategy? If you only had three valuation metrics, what would they be?
I was drawn to trend following algorithmically due to the long-term success of the CTAs I studied. However from 2011 'til present, this was one of the most challenging with both MF Global and long durations of not seeing equity highs and drawdowns.
- Risk per trade.
- Risk per sector.
- Total risk on the portfolio.
4. Which books or other investors changed the way you think, inspired you or mentored you? What is the most important lesson learned from them? Which investors do you follow today?
"Market Wizards." That it is possible to be like them if one is patient. Risk focused and has tenacity not to quit.
5. How long will you hold a stock and why? How long does it take to know if you are right or wrong on a stock?
I trade both stocks and a large basket of commodities. I would love to hold forever, which would mean it is trending. I use trailing stops with no emotions or time limits. In the majority of my trades, they do not work and I take a small loss and exit quickly.
Not being right or wrong. Either the trade works or not.
6. How has your investing approach changed over the years?
I am basically using the same models as they are simplistic and have stood the test of time. However this does not mean I did not have drawdowns. Also have had them and will in the future. The only change I added is I am more apt to go short; however, it must pass a long series of aspects.
7. Name some of the things that you do or believe that other investors do not.
They do not fully grasp risk and that anything can and will happen. No one believed the Nasdaq could fall as much as it did.
8. What are some of your favorite companies, brands or even CEOs? What do you think are some of the most well-run companies? How do you judge the quality of the management?
I am not fundamental.
9. Do you use any stock screeners? What are some efficient methods to find undervalued businesses apart from screeners?
Regarding stocks, I am a canslimmer, but most profits come out of a bear market. We are probably in the last throes of a long-term bull market. Hard for me to be too positive.
10. Name some of the traits that a company must have for you to invest in, such as dividends. What does a high-quality company look like to you and what does a bad investment look like? Talk about what the ideal company to invest in would look like, even if it does not exist.
I would suggest reading material from Investors Daily or Investors.com. It is a combination of fundamental and technical.
11. What kind of checklist or homework do you utilize when investing? Do you have a specific approach, structure, process that you use? Or do you have any hard cut rules?
Build a watch list of fundamentally strong profitable stocks and wait for a breakout of some sort.
Yes, everything is rule based. I have a concentrated portfolio, exit at 7% stop loss plus move stops as the position moves if it does. Take profits in most cases at 20% to 25% except if a stock moves up 20% greater in several weeks. This stock could be a major mover. Give it room to run.
12. Before making an investment, what kind of research do you do and where do you go for the information? Do you talk to management?
Most investments regarding stocks are obvious or reading through Investors.com
These are new ideas, new management and mostly extremely profitable. They move up and then consolidate, then look to buy break out of the consolidation.
13. How do you go about valuing a stock and how do you decide how you are going to value a specific stock? When is cheap not cheap?
I am not a bottom fisher; I do look at ETFs and look for ones that are completely beaten up. I want to buy 70-day highest high and the ETF above a 200 DEXMA.
14. What kind of bargains are you finding in this market? Do you have any favorite sector or avoid certain areas, and why?
I am not confident due to the age of this bull market yet believe anything can happen as in 1999.
15. How do you feel about the market today? Do you see it as overvalued? What concerns you the most?
Duration of move.
16. What are some books that you are reading now? What is the most important lesson learned from your favorite one?
Not really reading books on trading. I believe in my models, and it is just a numbers game.
17. Any advice to new value investors? What should they know and which habits should they develop before they start?
Read. Be willing to lose money. Be willing to lose small percentages of your account size. Most want to be right. This does not exist in trading.
18. What are some of your favorite value investing resources or tools? Are there any investors that you piggyback or coattail?
Stipulated.
19. Describe some of the biggest mistakes you have made value investing. What are your three worst investments that burned you? What did you learn and how do you avoid those mistakes today?
Cheap can get cheaper. Not taking a quick loss when a trade does not work. Honor the stop; with stocks 7%, with commodities I risk in most cases 4% to 5% of my account on any trade. This way I hopefully can survive.
20. How do you manage the mental aspect of investing when it comes to the ups, downs, crashes, corrections and fluctuations?
This is the hardest part. One of the managers with whom I invested taught me mostly to focus on my mental condition on trading. It is a marathon. It is never easy. Mark Douglas is a great read
21. How does one avoid blowups in value investing?
I think it is unavoidable if you do not trade with hard rules and hard stops.
22. If you are willing to share, what companies do you currently own and why? How have the last five to 10 years been for you investingwise compared to the indexes?
As stated, not very confident at this point. Mostly investing in commodities. Been a very tough run recently, and it would be nice for a regression to the mean.
23. Here's a fun one – What stock would Warren Buffett (Trades, Portfolio) or Benjamin Graham buy today if he were you?
I am not as clever as they are. Pass.
24. What is the most contrarian investment you've ever made? Why did you make it and how did it turn out?
I buy drawdowns of managers who have been active for decades. I want to think they all of a sudden did not get stupid. I wrote a book on the topic, "The Bible of Compounding Money." In the book are many examples.
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